Money Sense July 2010 issue Q&A with Eden

1. When and how did you get started in real estate investing? And what attracted you to this field?

It was February of 2008 when I first attended Larry Gamboa’s Think Rich Pinoy Seminar. Before then, I had been looking for local books on real estate investing after reading Robert Kiyosaki’s Rich Dad Poor Dad.

At that time, I was still employed as a process engineer in a semiconductor company. Even though the pay was good, there was something lacking that I couldn’t find within the confines of my cubicle.

I got into the stock market and got burned in the mid-2007 market crash and hadn’t recovered. My boyfriend then (now my husband) and I partnered in a dimsum food stall in the place of his employment that later on included a waffle cart. It lasted for just 6 months and we realized that food business is not our forte.

Then we bought our first real estate investment--a condominium unit in Taguig. To save on the acquisition cost, I applied as an agent. But I didn’t realize until 6 months later that I just taken my first step into my real estate investing career.

It was the possibility of doing something a lot different from what I was doing then that attracted me to go into real estate investing. I fell in love with the thought of managing my own time and was inspired by the success stories I had read in books.

I went as far as to discontinue my master’s degree in electronics engineering in favor of pursuing the path of entrepreneurship. I didn’t have any sales background, except for the sales training I got by being an agent - I even considered selling as taboo, but later on realized that it was one of my core gifts that fits perfectly in this field.



2. What would you consider your first big win or deal?

I consider my purchase of a Quezon City townhouse my first win. I bought it from a bank at 50% off market value through an auction and paid a downpayment of 20%, which was paid by an investor. I then sold it at 70% market value on a flexible term scheme (rent-to-own) after 7 weeks of acquisition, and with that I repaid the investor. Even if I didn’t get a huge amount upfront from that deal, I converted what I read in theory by actually doing it.



3. Who do you consider your mentors and what’s the most important thing you learned from them?

I have 5 mentors.

Larry Gamboa was a phone call away on every deal, especially on my very first deal. He pointed out the importance of finding one’s core values and stressed on working within them. Our weekly meetings taught me the value of commitment and focus.

Trace Trajano provided weekly coaching sessions that focused on the proper mindset and working on the business and not in the business.

Bo Sanchez broadened my comfort zone by instilling that the purpose of acquiring wealth is for you to be a blessing to others.

Nelson Terrible and Randy Manaloto gave me a vision on what I can do and what I can become if I continue what I am doing now.



4. Which books, websites, and other resources do you recommend for beginning investors?

Visit my blog renttoownproperties.blogspot.com to get an idea how I market my properties. You can also read through askeden.blogspot.com, tracetrajano.com and thinkrichpinoy.com for real life experiences and practical answers to specific real estate questions. Also check foreclosurephilippines.com for a list of bank acquired properties for auction.



5. How much can one expect to earn in real estate?

It ranges from nothing to a few million pesos depending on which path you take.



6. What are three different ways one can earn money in real estate?

The most traditional way is by being a broker or an agent which is how I started and learned the basics on real estate transactions. Income is usually by percentage of the selling price.
Wholesaling a property requires taking control of a property and selling your rights to the property to another investor or an end-user. You dictate how much income you receive. It is paramount that the acquisition price be very low so that you are also able to sell low which is a factor on how much income you can command.
Retailing is like wholesaling, the only difference is that you get to renovate the property and you have different target end-users. You dictate both how much income you receive and how you will receive it – through cash, or in trickles in the form of a monthly passive income.



7. Per your experience, which of these strategies or investment models gives the highest chances of succeeding? Gives the best returns?

The easiest way and will give the highest success rate is by being a broker/agent. Retailing gives the best returns.



8. What are the risks involved in investing in real estate investing?
And what can one do to mitigate those risks?

Getting bad deals and “tenants from hell” (as Larry Gamboa stated in his book Think Rich Pinoy) top the risks involved in real estate investing. Doing your due diligence and getting a good lawyer to keep you protected through the contracts is the best way to mitigate these risks.



9. What would you consider your worst investment mistake? What lesson
have you learned from that experience?

In one of my first real estate deals, I entered into a partnership without having a contract and was left out during income distribution. I charged it to experience. And from then onwards, everything must be in writing.



10. For the beginning investor, what advice can you give to get started?

I get a few questions like, “We are looking at the same lists in banks and newspapers, how do you spot good deals?” I’d always say, start by familiarizing yourself with the prices of properties for sale or sold in your own area or the area you want to focus on. Walk around the neighborhood and ask around, network with brokers and look at online
sites where these properties are posted. Naturally, the opportunity will present itself in the form undervalued properties for sale or of neighbors seeking your help in selling their property.

I describe myself as a perennial student because I continually enroll in classes for self improvement. Invest on yourself by attending courses or seminars specific or supplementary to real estate investing.

Seek mentors. Accelerate your learning curve by asking questions or partnering with someone who have done what you want to do.

Lastly, be persistent. Do not stop at the first sight of failure. At 24, I overcame barriers and accomplished a feat that I hadn’t even dreamed of myself--all because of my persistence, and I’m sure you can too.

Question:

I just would like to clarify as to who would hold the mortgage for your in-house financing for your various listings?


Eden says:

It depends on the property status.

- There are properties that I already paid cash and offer in-house financing
- For properties bought terms (either mortgage/CTS), contract is still in my name while buyer pays in-house financing. We sign a CTS for this case.
- Some buyers opt to pay through bank financing/pag-ibig where property will be taken out from the bank (or institution where property was bought) and transferred to their name under an approved loan by bank/pag-ibig and the loan is annotated to the title




Question:

I am asking because you offer in-house financing for as long as 15 years. How will we be protected as buyers in case something happens to the mortgagor?


Eden says:

I have a property exactly like this case. There is a clause in the contract that in case something happens to me (mortgagor), the contract is still valid and taken over by a successor (immediate family member or another person assigned.) This protects the buyer in the eventuality you mentioned above.

Question:

I am interested on participating in a Bank auction. I saw the property and it was good, however, the catch is that the title is still in the previous owner's name and is currently in the BIR office for consolidation process.

The account officer told me that the process would take 2-3 months before the title is finally consolidated into the bank's name.
I also asked the account officer if they have receipts like CWT, DST and Real estate tax; he said "Yes" and they can show it to me on the day of the auction.

They also gave me the Certificate of sale between the bank and the former owner, I haven't verified this yet at BIR. They will also shoulder all expenses for the consolidation process.

Do you think it is still worth pursuing? I could wait til the title is consolidated but there is a chance that this property will be bought because of its attractive price.


Eden says:

As a general rule, for starters, veer away from properties without a clean title.
It will cause more headache than the profits it may generate. =)

Question:

If I buy a property through bank loan 15 years monthly amortization then I want to wholesale the property to a buyer.

What are the things I need to process?

Should I pay the bank the whole price for me to get the title and transfer the title to the wholesale buyer?

Eden says:

First, get to know the rules of the bank.
Every bank has its own personality. Each one has its own requirements.

Assuming you have already passed the stringent loan requirements (or automatically qualify for the loan in case of winning auctions), you may ask the bank the following:

1. Can I assign the property to another person? Some banks doesn't allow this and will require double transfer - meaning, you have to pay for the taxes first before the title is transferred to the buyer. If so, what is the process of assigning the property? Another trick is putting your name AND AN ASSIGNEE during the contract signing. Again, some banks doesn't allow this.

2. In case your buyer wants to pay cash. Ask the bank, what are the expenses/charges that I have to pay in pre-terminating a loan?

3. In case the bank allows transfers, what do I have to pay for the transfer?


LESSON: Never be afraid to ask questions to the bank. It is their job to keep you informed. You'd also be surprised how helpful they are :-)

Question:

I have a problem to share if you allow me, when i did my offline and online ads. Madami po masyadong mga sellers of houses (opportunities)and i can not handle them. I do not have solid list of buyers ( rehabbers and landlords ) since i am focusing in wholesaling kasi im starting pa and i read from TRP books its the best way to start.

Eden says:

First things first, you have to assess the property and the property sellers.
You need quality leads. You can answer the ff questions:

1. Is the property clean of any mortgage/loans? (For starters, I suggest you go for properties without problems)
2. Is the property saleable? (You can try marketing it first) The fact that you got info on sellers means that you can get buyers too
3. Is the asking price below the market value (check MAO in the Think Rich Quick book).
4. Is the property seller motivated?

Question:

Just a quick question. In buying/selling condos or apartments, do you take into consideration the energy efficiency of the building or the sustainability of the location? I am asking this with Climate Change as a reference.

Eden says:

You may consider that.

But I believe that worldwide, these factors weren't on top of the builder's priority. It is only now that these factors are considered and used more as a good angle of a marketing ploy.

The fact that there are other residents in the same building/ neighborhood makes it a viable residential place.
As investors, we prioritize things that are on top of the priority list of our buyers such as availability of water (surprisingly this is still a problem in some areas), electricity, accessibility, price etc.

Worrying too much leads to analysis paralysis